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Accident Exchange (~268)

Friday 25 September, 2009

Accident Exchange

Legal update

RNS Number : 6515Z

Accident Exchange Group PLC

25 September 2009

﻿

FOR IMMEDIATE RELEASE

25September 2009

Accident Exchange Group Plc

('Accident Exchange' or the 'Group')

UPDATE ON LEGAL ISSUES

We are today providing an update to the ongoing investigation into the conduct of Autofocus Limited ('Autofocus') and the ensuing civil claim against them. This update should be read in conjunction with theInterim Management Statementissued on 17 September 2009.

The Group has now produced an initial analysis of the number of open and closed claims where there may be defective evidence submitted by Autofocus giving rise to a potential under recovery of hire charges. Their evidence started to be submitted against an increasing number of claims from as far back as 2007.

Documents identifying the involvement of Autofocus arerecorded by the solicitors who have been acting in these claims and our preliminary analysis has so far involved gathering around 1.5 million pages of documents and indexing those documents to allow text searches to reveal the total potential claim exposure.

Our analysis continues but it is currently suggestive that at least 2,500 settled and open claims with a combined invoice value of £22 million may be affected by Autofocus' involvement in the insurers' defence strategies. Approximately 500 of these claims have already been closed with the balance currently being litigated.

The Ongoing Investigation

We first informed the Courts of our concerns over the accuracy and potential honesty of evidence being offered by defendant insurers in the case of Glossop v Christian Salvesen Logistics Ltd at Chesterfield County Court on 8 September 2009.That case has now been settled save as to the issue of costs which will be determined by the Judge in a month or so.

In spite of the assertion by Autofocus in a press release of 9 September 2009 of an intent to 'defend itself and its reputation' we have since learned that the Autofocus employee who submitted the evidence in that case hasvery recentlyleft the employment of Autofocus. As a separate matter, we have instructed our solicitors to make an application to the Court for permission to bring an action against that person for Contempt of Court.

Our investigation into the veracity of the evidence offered by Autofocus and their employees hascontinued. In the past week the rate of discovery of more cases where the evidence appears to be incorrect or dishonest has increased and,on a daily basis, our investigators continue to obtain witness statements that suggest that Autofocus'evidence is dishonest on further claims.

At present, we are focusing on those cases which are due for trial in the coming weeks in order to prevent insurers continuing to benefit from the ongoing submission of what appears to be unreliable evidence.

Since our announcement of 17 September, we have also received assistance from a number of third parties who themselves have had concerns over evidence produced by Autofocus. By way of example:

One of our panelfirmsof solicitors has received a copy of an e-mail that was sent by an employee of Autofocus to a prominent firm of defence lawyers acting for an 'at fault' insurer advising them that a material aspect of the Autofocus report omitted certain key facts which cast doubt over the veracity of the hire rate evidence in that report. Regardless of that disclosure, the Autofocus report was compiled and submitted in that case with the salient facts omitted from the report.

We have received a copy of an e-mail exchange between an Autofocus employee and a firm of solicitors in which the Autofocus employeeconfirms that where their investigations reveal hire rates that do not offer any saving over the credit hire rate claimed, then those higher rates are not included in the their rate reports effectively ensuring that the Courts are deprived of the full information on the market spot rate.

In addition to focusing on current cases, we are now also reviewing all cases where the final judgement handed down by the Court may have awarded less than the full value of hire charges claimed and can now be shown to be unsafe based on the existence of evidence from Autofocus which may not have been true.

Our investigations into all of the matters raised above continue.

Claim against Autofocus

A statement ofclaim has now been served and an application for pre-action disclosure has been filed in the High Court against Autofocus Limited and others alleging that they areguilty of the tort of conspiracy to use unlawful means, interference with the trade or business of Accident Exchange Limited (a major trading subsidiary of Accident Exchange Group Plc) by unlawful means and deceit.The application before the High Court seeks disclosure in respect of telephone records and other materials which we believe will be supportive of the direct evidence we have already obtained in our investigation and which will further prove that a large part of the reports and statementsgiven by Autofocus have been fabricated.

The Insurer and Solicitor reaction generally

We still have 16 investigators engaged in our investigation and we areuncovering fresh material on a daily basis. When we discover that new evidence we will serve it on the at fault insurer and seek to introduce it into the litigation process. The Courts are receptive to the introduction of this evidence and, we suspect, are rightfully concerned as to the potential scale of the issues we have unveiled.

Where we are serving this additional evidence in these circumstances, a variety of responses are emerging. We are seeing some cases settle in full on the day before the trial. In other cases, we have seen Autofocus evidence withdrawn completely and the insurers unable to offer any evidence that the Group's hire charges are outside of the market spot rate. In cases where insurers do not withdraw the Autofocus evidence we have seen an increasing trend of the Autofocus witness failing to attend at Court to give that evidence.

It is now clear to us that the use of these Autofocus reports has become an embedded part of the defence process being deployed by certain UK motor insurers in their attempts to avoid paying credit hire claims at a market spot rate.

Dialogue with a number of solicitors representing at fault insurers and also with a number of insurers directly commenced on 9 September as our concerns over the Autofocus evidence materialised.

By and large, solicitors acting for defendant insurers are attempting to be pragmatic about the position where it is obvious that the evidence they are relying on may be unsafe or dishonest. As stated above, this is reflected in an appetite to settle claims ahead of court hearing dates.

We have now produced an analysis of those insurers who have most exposed themselves to the strategy of relying on Autofocus rate evidence and we have written to them detailing our concerns. Conversations are underway with a number of those insurers who acknowledge that any evidence of fraud in the insurance cycle - whether that be a staged traffic accident, an exaggerated personal injury claim or something as serious as dishonest evidence - requires urgent action to avoid further undermining the rule of law. Someinsurers are,however, slower to react.

Ongoing plan of activity

The key priority for the Group is to improve cash flow. A resolution of these issues is expected to improve materially the rate of settlement of claims. Accordingly, ourattention is focused on continuing to address these serious issues of dishonesty, to engage insurers in the issues and to bring to the attention of the Court, at whatever stage in the proceedings dishonesty is identified, the results of our investigations in order to ensure that justice prevails.

We are issuing witness summonses in every case where we have a hearing scheduled in order to require the attendance of the Autofocus witness at Court on a case by case basis in order that they can be cross examined on their evidence.Wherever it becomes clear that the evidence tendered is dishonest we will seek the leave of the Court to commence an action against that individual for contempt of court. Since the Glossop case was heard on 8 September, many of those individuals have failed to attend at Court even when summonsed to attend and,in a number of cases,we have been informed by solicitors representing the 'at fault' insurerthat those individualshave now left the employment of Autofocus.

We have also provided details of our investigation to our industry peers and we are facilitating a process of co-operation and exchange between other credit hire companies who have alerted us that they have been affected by this issue.

Given the weight of evidence we have amassed, we are not surprised at the hesitation of Autofocus' employees to appear in court to face cross-examination. We also acknowledge that the UK insurers who have been relying on this line of defence will take time to react to appreciate the magnitude of the issue with which they are faced. As they do, however, the Board believes that they will recognise that the discounts offered within the terms of the GTA are substantial. Moreover, where insurers have chosen to pursue claims outside of that protocol on the basis of rate evidence which is clearly false, they will leave themselves open to materially higher charges and associated legal fees as a consequence.

Further updates will be provided, as appropriate.

Commenting, David Galloway, Non Executive Chairman, said:

'We were disturbed at the gravity and volume of these issues when we first became aware of them a week or so ago. We have made good progress internally in reacting to the issues and in providing evidence to the Courts of where this dishonesty has occurred.

'At a time when insurers are themselves subject to fraud and deceit on an increasing scale it is disappointing to find that a number of leading insurers have so far failed to engage or address this discovery.'

ENDS

CONTACTS:

Accident Exchange Group Plc

Steve Evans, Chief Executive

08703-009 781

Martin Andrews, Group Finance Director

08703-009 781

Singer Capital Markets Limited

020-3205-7500

Shaun Dobson, Joint Head of Corporate Finance

Bankside

Steve Liebmann or Simon Bloomfield

020-7367-8888

About Accident Exchange

Based in the West Midlands and with regional depots in Glasgow, Belfast, Warrington and Dartford, Accident Exchange delivers accident management and other solutions to automotive and insurance related sectors. Fully listed, the stock code is LSE: ACE.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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